Oz KiwiSavers may get money early

New rules will benefit kiwis who have saved in Australia and decide to move home. Photo / Thinkstock

New Zealanders moving home from Australia will soon be able to access some of their retirement savings from the age of 60.

Legislation introduced in Australia yesterday will make it possible for people to transfer retirement savings across the Tasman, in either direction, from July next year.

Kiwis who have worked in Australia and made compulsory superannuation payments will be able to bring their savings across into a KiwiSaver scheme.

They will also be able to access those savings five years earlier than the usual age in New Zealand, said Michael Littlewood, director of Auckland University's Retirement Policy and Research Centre.

The reason for this is that Australians are able to withdraw their retirement savings at 60-years old, and in some cases up to five years younger, compared to 65 in New Zealand.

"For those who make the transfer, they could take out their Australian savings from what is called the 'preservation age' in Australia," Littlewood said.

"If you're intending to retire in New Zealand then it makes sense to have your retirement savings here."

Australia's preservation age, ranging between 55 and 60, means eligibility for access to superannuation savings depends on an employee's date of birth.

The legislation to establish a trans-Tasman retirement savings portability scheme removed one more barrier to labour mobility between the two countries, said Australia's Minister for Financial Services and Superannuation, Bill Shorten.

"The new scheme will assist the thousands of Australians and New Zealanders who move across the Tasman Sea each year, help them to consolidate their retirement savings in their country of residence and avoid paying fees and charges on accounts in the two countries."

More than 50,000 New Zealanders moved to Australia in the last year, while about 14,000 people left Australia permanently for New Zealand, he said in a statement yesterday.

Littlewood said the news rules are a positive step.

"Overall it's a good thing because it's administratively much more convenient.

"The development of these types of common rules is to be encouraged."

Previously, New Zealanders who made payments to Australian pension schemes had to leave them there.

Australians moving to New Zealand will be able to bring their benefits with them.

The rule also means New Zealanders moving to Australia will be able to transfer their KiwiSaver scheme savings and add them to their Australian superannuation benefits. But those KiwiSaver funds will not be accessible until the age of 65.

Morningstar co-head of research Chris Douglas said he does not think the legislation will lead to a flood of money entering into KiwiSaver.

"It's certainly very appealing to have all your savings in one place but I don't see a rush happening."

A major reason people might choose to leave their savings in Australia was because there are more investment choices there, Douglas said.

"That's not to say there's not a good mix of options here but we're still relatively small and KiwiSaver is still growing."

He said there could be tax advantages to bringings savings to New Zealand though, because investment earnings in Australia are subject to a Capital Gains Tax.

A common problem under the previous system was that people would often move from Australia to New Zealand and leave behind small or inactive superannuation accounts.

These would regularly be forgotten about or whittled away by fees and administration costs, Littlewood said.

"People would either think the amount was not worth worrying about or an address would get lost.

"Someone might shift and not inform their fund manager."

How much was actually being left untouched or forgotten about was not clear, he said.

"There are some people who have made quite large estimates but we don't really know.

"But you can count on it being a fairly large sum of money."

Finance Minister Bill English said in 2009 that Australia's tax office had estimated it held about A$16.6 billion (NZ$20.8b) in "lost accounts" in the Australian superannuation system.

Overall, it would be a fairly simple decision for most kiwis coming home, Littlewood said.

"Most people will make the decision on the basis of 'I'm living in New Zealand now and intend to retire here and so it makes sense for my retirements savings to be here too."